(Source: Littler by Sebastian Chilco, Adam J. Fiss, and Michelle Barrett Falconer – October 5, 2023)

On October 4, 2023, Governor Gavin Newsom signed SB 616, which arguably results in the most significant changes to California’s statewide paid sick and safe leave law since the Healthy Workplaces, Healthy Families Act (HWHFA) in 2014.

Effective January 1, 2024, the amendment increases the number of job-protected paid leave hours employees can take each year under state law. When an employer implements an accrual and carryover policy, this change also increases how much paid leave employees can accrue and carry over from year to year. Likewise, when an employer uses a frontload policy, the amendment increases the amount of paid leave employers must annually frontload. SB 616 also extends a few HWHFA legal protections to certain unionized employees who are not currently covered by the HWHFA, and will continue not to be covered aside from these limited rights.

The amendment to the HWHFA establishes greater uniformity statewide concerning some aspects of paid sick and safe leave through partial preemption of local ordinances. While employers with operations in multiple California cities may welcome this change, the impact of the new limited preemption provision remains to be seen.

The law affects how companies can comply with the law through existing paid leave policies. It tweaks standards in some lesser-known parts of the HWHFA and makes “official” exclusions from the law that were established in court legal challenges. The changes are expected to most affect employers not currently subject to local ordinances requiring paid sick and/or safe leave, or other types of paid time off. However, even employers already subject to one or more local laws might eventually also feel SB 616’s effect.

Accrual, Carry-Over, Frontloading, and Use Caps
Currently, an employee’s banked, accrued paid sick and safe leave may be capped at 48 hours or six days – whichever is greater. Due to SB 616’s amendments, this amount will increase to the greater of 80 hours or 10 days. California’s accrual limitation is unique in that it is not a finite annual or overall cap, but rather a temporary one. For example, once an employee accumulates an amount of leave that equals the “cap” amount, they stop accruing, but can immediately restart accruing leave when they use leave, and their banked amount falls below the cap. The temporary accrual cap also caps the amount of unused leave employees can carry over from one year to the next. This is because under the HWHFA, “accrued paid sick days shall carry over to the following year of employment.”

In lieu of carryover, however, the HWHFA allows employers to frontload a specific amount of paid leave each year. Currently, the law requires employers to frontload 24 hours or three days, whichever is greater. However, under SB 616, that amount will increase to the greater of 40 hours or five days. It is important to note that while state law allows employers to frontload leave annually and avoid carryover, that is not always the outcome under local ordinances throughout California. Under some local laws, employers may still need to carry over frontloaded leave because that is what the ordinance expressly requires, or because the jurisdiction treats any “frontload” as an advance on accrual.

SB 616’s changes also impact two related HWHFA provisions that are less commonly discussed regarding California’s paid sick and safe time law. In lieu of using the standard one-leave hour for every 30 hours worked accrual rate, the current version of HWHFA allows employers to use a different accrual rate. This is acceptable only if employees accrue leave on a regular basis, resulting in them having no less than 24 hours of accrued leave by the completion of their 120th day of employment, and having that same amount by the completion of the 120th day in each subsequent year. SB 616 changes this accrual exception to also require that employees have accrued no less than 40 hours of leave by the 200th day of employment and that same amount by the 200th day in each subsequent year.

Also, when frontloading is used to comply with paid sick and safe time obligations, many paid sick and safe time laws require the frontload distribution to occur when employment begins. For example, the front load distribution would occur on the first day of employment. California’s existing state law, however, allows employers to provide no less than 24 hours or three days of paid leave for employees to use by the time they complete their 120th day of employment. Essentially, this option allows employers to impose a lengthier waiting period for new hires when frontloading is used, versus what the HWHFA otherwise allows (an 89-day waiting period, per the state labor department) when accrual is used. As a result of SB 616, in addition to providing the frontloaded 24 hours/three days of paid leave by the 120-day mark, employers must also ensure that the employee has no less than a total of 40 hours, or five days of paid leave (between the initial 120 day frontloading and the subsequent 200 day frontloading) for the employee to use by the time they complete their 200th day of employment. This adds another interesting twist that is not typically seen with other paid sick and safe time laws – the ability to provide the frontloaded amount in a piecemeal fashion rather than provide the entire amount at one time.

Currently, the HWHFA allows employers to limit employees’ paid leave use per year to 24 hours or three days, whichever is greater. SB 616 increases the permitted annual use cap to the greater of 40 hours or five days.

Covered & Not Covered Employers and Employees
The HWHFA does not currently apply to employees covered by a valid collective bargaining agreement (CBA) if the CBA expressly provides for employees’ wages, hours of work, and working conditions; provides paid sick days, paid leave or paid time off; requires final and binding arbitration of disputes concerning paid leave; provides premium wage rates for all overtime hours worked; and establishes a regular hourly rate of pay of not less than 30% more than the state minimum wage rate. SB 616’s amendments, however, extend some of the HWHFA’s protections to these employees:

  1. Covered Uses: The CBA must allow paid leave to be used for diagnosis, care, or treatment of an existing health condition of, or preventive care for, an employee or family member. If an employee is a victim of domestic violence, sexual assault, or stalking, the CBA must allow paid leave use to obtain or attempt to obtain any relief. This includes, but is not limited to, a temporary restraining order, restraining order, other injunctive relief to help ensure the health, safety, or welfare of the victim or their child; for medical attention for injuries; to obtain services from a domestic violence shelter, program, or rape crisis center; for psychological counseling; and to participate in safety planning and take other actions to increase safety from future domestic violence, sexual assault, or stalking, including temporary or permanent relocation.
  2. Replacement Worker Prohibition: As a condition of taking paid leave for a covered reason, employers cannot require an employee to search for or find a replacement worker to cover the day(s) they will be absent from work.
  3. Anti-Retaliation: Employers cannot deny an employee the right to use sick days, or discharge, threaten to discharge, demote, suspend, or in any manner discriminate against an employee for using or attempting to use sick days; filing a complaint with the state labor department or alleging a violation of the HWHFA; cooperating in an investigation or prosecution of an alleged HWHFA violation; or opposing any policy, practice, or act that the HWHFA prohibits. A rebuttable presumption of retaliation applies if an employer takes prohibited action within 30 days of the employee’s filing of a complaint with the state labor department, alleging a violation, cooperating with an investigation or prosecution of an alleged violation, and/or opposing an unlawful policy, practice, or act.

Additionally, SB 616 excludes employees and employers covered by the federal Railroad Unemployment Insurance Act (RUIA). This change expressly incorporates into the law the outcome of litigation against the state by the rail industry, which successfully argued that the RUIA preempted California law.

Partial Preemption of Local Standards
SB 616 adds new subdivision (r) to California Labor Code section 246, which provides that “Subdivisions (g), (h), (i), (l), (m), and (n) of section 246 shall preempt any local ordinance to the contrary.” Generally, these subdivisions cover the following obligations or practices:

  1. End of Employment & Reinstatement: Employers need not cash out unused paid sick and safe leave when employment ends. However, they must reinstate such unused leave for employees rehired within one year of the date of separation, unless leave was cashed out.
  2. Advance Leave: At their discretion and with proper documentation, employers can advance leave to employees before they accrue it.
  3. Paystubs: The amount of paid leave available for HWHFA sick and safe time use must be on an itemized paystub or in a separate writing provided on payday.
  4. Rate of Pay: The standards employers must use to calculate the rate of pay for paid sick and safe time use for employees who are non-exempt and exempt, which the state labor department limits only to those subject to the executive, administrative, and professional exemption.
  5. Employee Notice: How much notice employees must provide their employer for foreseeable and unforeseeable absences.
  6. When Leave Must Be Paid: Employers must compensate employees for used paid sick and safe leave by the payday for the corresponding pay period, after the pay period in which the employee uses leave.

Despite potential initial impressions, these preemptions are likely to have a limited effect. For example, no local ordinance requires employers to cash out unused paid sick and safe leave when employment ends. Only two ordinances discuss advancing leave – one contains language identical to state law and the other was not so different that employers struggled to harmonize state and local requirements. There is only one local ordinance with a paystub requirement, and it is identical to state law. Although there are a few instances in which an employer might need to determine whether state or local law provides the more beneficial pay rate calculation and apply that standard when compensating an employee when they use leave, state law already is often the more employee-friendly calculation. Given the rate of pay calculations for those other than exempt executive, administrative, or professional employees can be challenging mathematically, the benefit of a uniform standard might be seen less favorably because of the increased costs it might generate. As there is little deviation between state law and the local ordinances concerning advance notice employees must provide to use leave, not much should change. Finally, concerning the timing of providing pay for paid sick and safe leave use, of the local ordinances that expressly address the issue (not all do), all already use the same timeframe as state law. Assuming a local jurisdiction whose law is silent on the issue were to suggest that payment was due earlier, then SB 616 would have the effect of setting a consistent standard statewide.

Using Existing Policies
SB 616 amends the HWHFA provision concerning so-called “grandfathered plans.” When the HWHFA was enacted in 2014 and went into effective the following year, employers did not need to provide additional paid leave if they had a paid sick or paid time off plan in effect before January 1, 2015 that included leave employees could use for the same reasons and under the same conditions as the HWHFA requires. These were still subject to a few additional requirements, like employees being able to accrue no less than one day or eight hours of paid leave within three months of each year, and employees being able to earn at least three days or 24 hours of paid leave within nine months of employment. Moreover, per the “grandfather clause,” if an employer modifies accrual standards in its policy after January 1, 2015, it needs to either adhere to the HWHFA’s accrual standards or frontload the amount the HWHFA requires, unless the employer increases its policy’s accrual amount or rate. As with annual use caps, SB 616 amends this provision to increase the amount of leave employees must be able to accrue from three days or 24 hours to five days or 40 hours. Additionally, it accelerates the timeframe for employees to accrue that amount of leave, from within nine months of employment to within six months of employment.

For unknown reasons, the “grandfather clause” continues to reference January 1, 2015, instead of January 1, 2024. If leaving in the 2015 date is intentional, that might raise concerns about retroactivity given amendments are meant to be prospective “unless expressly so declared” by the legislature, which did not occur in SB 616. Another possibility, however, is that the 2015 reference is an unintentional oversight, as SB 616 was amended multiple times throughout the legislative process, and that when legislators return in 2024, they will retroactively change the 2015 reference to 2024.

For employers whose paid leave benefits do not already meet, or exceed, SB 616’s requirements, there remains limited time to review and revise your policies, adjust payroll standards, and educate employees on new benefits and protections. Even more crucial, if your business is in one of the eight local jurisdictions with existing paid leave ordinances, there is not a lot of time to determine whether, and how, to respond to SB 616’s partial preemption.

Our human resource experts here at CalWorkSafety & HR closely monitor this, and all the ever-evolving rules and regulations. If you have questions or are unsure how this could impact your business, contact us today to ensure your business’ compliance. Visit us online at https://www.calworksafety.com/contact-us or call (949) 413-6821.